Retailers Ignoring Customer Privacy, Website Usability Put Business at Risk

Mistrust in how online retailers handle their customers’ personal information is at an all-time high, costing merchants lost revenue and follow-up orders.

Over a quarter (26%) of consumers have abandoned a brand in the past 12 months due to privacy concerns. Establishing a higher trust level is no longer an either/or alternative; it is becoming an increasingly important basis for digital retailers’ success if not survival.

Technology and security provider firm Thales released its 2024 Digital Trust Index Ranking in February. The report revealed that only 8% of consumers feel comfortable sharing their personal details with online vendors. Based on responses from 12,426 consumers globally about their relationship with online brands and services, the findings challenge the growing popularity of online shopping.

The survey results cover more than just food and soft goods purchased online. Media and entertainment, social media, and logistics companies are languishing at the bottom of the industry rankings.

Thales found that most retail customers now demand a good balance of security and positive digital experience from all online business encounters. Research also revealed that newer forms of online engagement pose barriers to securing customers’ trust.

When sharing their information, consumers place more trust in banking, health care, and government services. According to Thales Vice President of Identity and Access Management, Danny de Vreeze, this is a universal trend across all the markets surveyed.

“This is perhaps unsurprising when considering how highly regulated these industries are, the types of information they are responsible for handling, and the measures they have put in place to keep consumer data secure,” he said.

Problems Ignored, Solutions Not Forthcoming

This year’s report ranked retail and hospitality as the fourth least trusted sectors. This aligned with the 2022 report findings, in which the retail industry was still among the least trusted industries, advised Haider Iqbal, director of product marketing for Thales IAM business.

“But interestingly, while retail wasn’t among the most trusted in either 2022 or 2024, consumers were significantly more trusting of retail organizations in 2022 (20%) when compared to this year’s findings (8%),” Iqbal told the E-Commerce Times.

With such a high percentage of consumers not trusting data security, the problem seems to be falling on deaf ears. While a clear realization of the need for data privacy exists, he noted that realization does not always lead to actionable results.

“Regional dynamics appear to be the biggest driver behind taking action. With strong enforcement of GDPR by the regulatory authorities, the retail players in Europe are taking more serious steps towards better practices and controls for implementing consumer data privacy,” Iqbal offered.

The H&M data protection violation fine was an eye-opener for the industry. However, as the report points out, retail companies should not just be looking at data privacy because regulators want to enforce it.

“They should be looking at it because their customers are demanding it,” Iqbal advised.

Climbing the Digital Trust Index

The report findings reinforce that the right to privacy and security is non-negotiable. The majority of customers (89%) are willing to share their data with organizations.

However, that comes with some non-negotiable caveats. For instance, over a quarter of consumers (29%) have abandoned a brand in the past 12 months because it demanded too much personal information.

“While businesses are subject to international data privacy laws regardless of sector, those further down the rankings have been subjected to fewer directives directly addressing both data security and privacy,” offered de Vreeze.

As more businesses grow their digital presence, lessons can be learned for non-regulated industries as consumer preferences evolve.

More than four in five (87%) expect some level of privacy rights from the companies with whom they interact online. The biggest expectation is the right to be informed that their data is being collected (55%), closely followed by the right to have their personal details erased (53%).

Online customers also expect more concessions on privacy standards businesses follow. For instance, 39% expect the right to correct their data, 33% expect the right to request a copy of it, and 26% expect the right to move data from one platform to another.

Online Frustrations Further Fester Brand Loyalty

The Thales report also highlighted the role a well-oiled website experience plays in cementing customer allegiance, regardless of the privacy factors they encounter. Customers’ concerns go deeper than how online services use their data.

In addition to privacy demands, organizations must also deliver a seamless online experience to earn the trust of their customers. Today’s consumers are increasingly time-conscious, with over a fifth (22%) stating they would instantly give up on an online interaction when facing a frustrating experience.

Respondents also named advertising pop-ups as their number one frustration (71%), closely followed by password resets (64%) and having to re-enter personal information (64%). The study also named complex cookie options a top frustration by 59% of those surveyed.

“Our findings unveiled that 93% of consumers give up on an online brand after five minutes or less if they encounter a frustrating experience. In fact, 25% give up within just the first one or two minutes. This means companies only have a small window of time to ensure they provide users with the digital experiences they want,” said Iqbal.

Lip Service No Longer Effective, Consumers Demand Action

As Iqbal sees retailers’ responses, they will not soon have the choice of just paying lip service to data privacy and security. With GDPR as the predecessor to any U.S. legislation — and following actions like California’s CCPA and Virginia’s VCPA — he sees more regulatory action taken for consumer data rights.

“With more scrutiny than ever on large language models (LLMs) and where they get their training data, this conversation will only become more important and will make it so legislation ensures that the right to privacy and security is as non-negotiable as the report respondents are requesting,” he predicted.

The report highlights that email (40%) and phone calls (28%) are not just the preferred channel of communication for consumers in retail but also in other industries, according to Iqbal. The important trend to note is that there are now significantly more channels and touchpoints for retail services to handle.

The notion of having a good strategy for omnichannel experiences isn’t just limited to the banking industry, for example. In-store/in-person communication is still significantly important as a mode of communication (32%) in retail. The industry needs to embrace this reality and gear itself toward building a consistent omnichannel experience for its consumers,” he urged.

What’s the End Game?

Iqbal maintains that trust is not a monolithic concept, especially in the digital world. Organizations must devise their own formula for measuring trust.

“The perception of trusting a retail brand is likely to be very different from the perception of trusting a bank or an insurance company,” he noted, adding that Thales “understands that this notion of trust can be very nuanced, not just from one industry to the other, but also within an industry.”

This understanding is why organizations must have fundamental capabilities in their digital channels to tweak data security and data privacy controls, Iqbal explained. For example, when a company discovers the reasons for consumer abandonment but lacks the means or agility to address them, it must be ready for a steady churn of consumers.

“If you are still relying on legacy and often monolithic systems to address the modern and fast-evolving needs of consumers and regulators alike, you are not geared for the future,” concluded Iqbal.